National Health Insurance Policy Brief 7 The Role

National Health Insurance Policy Brief 7 The Role of Private Health Insurance 7 December 2009

NATIONAL HEALTH INSURANCE POLICY PROPOSAL Presentation to Human Development Cluster Date: 23 September 2009

The Future Role Existing Medical Schemes South Africans may choose to continue to contribute to medical aid schemes but ONLY after they have contributed their share to NHI Fund (mandatory contribution) Source: National Health Insurance Policy Proposal. Presentation to Cabinet Human Development Cluster 23 September 2009

% of respondents who declared they were ill and consulted a health worker in past month by wealth decile, and reasons for those who did not (GHS 20022007) 100% Why did you not consult a health worker? 90% 80% 70% Consulted a health worker Too expensive 60% Too far 50% Not necessary Don’t know 40% Other 30% 20% 10% 0% 1 2 3 4 5 6 Wealth Decile 7 8 9 10 Source: Prof Servaas van der Berg, Dept of Economics, University of Stellenbosch

Which health workers were consulted by those were ill, by wealth decile, GHS 2002 -2007 100% Percentage 90% 80% Nurse 70% Doctor Specialist 60% Other 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 Wealth Decile 7 8 9 10 Source: Prof Servaas van der Berg, Dept of Economics, University of Stellenbosch

Scenarios for Shortage of GPs Source: Van den Heever DBSA Process 2008

Universal Coverage l June 2009 NHI proposal: “The goals of the national health insurance include. . . providing universal coverage for all South Africans, irrespective of whether they are employed or not”. l Confusion in the debate between universal coverage for healthcare and universal coverage for health insurance. l It is estimated that only some 16. 4% of South Africans had health insurance cover in 2008. l Howeveryone in the country has access to healthcare, either in the public sector or through medical schemes, bargaining council funds or other employer-based arrangements.

Public and Private Spend l R 11, 300 pbpa for those belonging to medical schemes (this includes both medical scheme spending of R 9, 600 and estimated out-of-pocket payments of R 1, 700); l R 2, 500 pbpa for the middle group (includes out-of-pocket payments to private primary care providers and government spending on hospital care); and l R 1, 900 pbpa for those using government primary care and hospital services. l But this mixes Government spend from public money and purely private spend. Need to compare Government spend in the public sector and the subsidy from Government to the private sector. Source for figures: Health Economics Unit, UCT, Information Sheet: The Public-Private Health Sector Mix in South Africa

Tax Subsidy for Medical Schemes l The Ministerial Task Team on Social Health Insurance estimated the tax subsidy to be R 10, 1 billion in 2005. l In 2005 this was equal to some 20% of the public health budget. l At that stage the tax subsidy amounted to about R 120 pbpm for medical scheme members (and very unequally distributed), while the public sector spend was R 96 pbpm. l This is patently unfair. Since 1994, successive groups of researchers and commissions have strongly recommended that this tax subsidy be scrapped. l An alternative was proposed that every citizen receives an equal percapita subsidy for healthcare, equivalent to the amount spent person in the public sector.

Remove Tax Break and Replace with Per Capita Subsidy This has a dramatic impact for those earning below the tax threshold. The proportion of income may still be too high to be affordable but with some help from employer cover is now within reach. Source: Mc. Leod and Grobler, The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa, 2009.

Transition from no Financial Protection to Universal Coverage Source: Kirigia et al (2006) Health financing patterns and the way forward in the WHO African Region.

Universal Elements of Social Security Industrialized Countries combine tiers 1 and 2 Source: Van den Heever, September 2009 Developing Countries have different strategies for each

Tiered Healthcare Financing Source: Van den Heever, November 2009

Potential Role of Medical Schemes Eligibility to public health insurance Health services covered by PHI covers medically necessary curative services typically covered in public system PHI covers cost-sharing (co-payments, Complement deductibles, amounts above limits) ary PHI applicable to public system Individuals do have public cover Individuals do not have public cover Duplicate PHI Primary PHI (Parallel PHI) Substitute or services PHI covers only top-up health Principal not included in public systems or primary PHI Supplementary PHI (Top-up Insurance) Source: Private Health Insurance in OECD Countries, 2004. As amended.

Potential Role of Medical Schemes l Primary PHI: only available access to basic health cover; do not have public health insurance. l Principal: where social security scheme does not apply. Could be employer or union-based compulsory schemes. l Substitute: substitutes for public cover or employer cover. l Duplicate cover: cover already included under public insurance. Does not exempt individuals from contributing to public health insurance. Can offer access to different providers or levels of service. l Complementary cover: covers all or part of the costs not otherwise reimbursed (e. g. co-payments). l Supplementary cover: cover for additional health services not covered by public scheme. May include services not covered by public system such as luxury care, elective care, long-term care, dental care, pharmaceuticals, rehabilitation, alternative or complementary medicine, or superior hotel and amenity hospital services. Source: Private Health Insurance in OECD Countries, 2004

NHI Policy Proposal June 2009 l The future role existing medical schemes l “While the NHI calls for mandatory membership for all South Africans through mandatory contributions and social solidarity, it is up to the general public to continue with voluntary medical schemes cover after they have contributed to the NHI Fund. ” Proposal is for medical schemes to offer Duplicate cover. Possibly Supplementary cover but depends on definition NHI package. Non-EDL drugs, for example ? Source: ANC Task Team NHI Proposal to NEC, 13 July 2009

Implications of Current NHI Proposals l The February and June 2009 proposals on NHI from the ANC effectively relegate existing medical schemes to a “duplicate” role. l Those covered by medical schemes could fall well below 1 million people from the currently 8 million people covered. l Debates around this issue tend to become politically and ideologically heated but there are strong economic arguments for looking at the public-private mix in technical terms and playing to the strengths of each sector.

ANC Health Plan, 1994 Committee of Inquiry to consider NHI with following principles: l Current medical schemes form the basis. l Membership compulsory all formal sector employees and dependants. l Schemes may not exclude high risk [Jan 2000]. l Basic package of care to be statutorily defined [PMBs]. l Contributions for basic package will be income-related. l Pooled in central equalisation fund; each scheme paid according to risk profile i. e. a risk adjusted capitation fee. l Schemes can offer cover above essential package. Plan for a National Health Service (NHS). National Health Insurance less than 1 page of 77 page document.

Implications for NHI Debate l The February and June 2009 proposals on NHI from the ANC effectively relegate existing medical schemes to a “duplicate” role. l The ANC Health Plan of 1994 envisaged the creation of a National Health Service, not a National Health Insurance system. “A single comprehensive, equitable and integrated National Health System (NHS) must be created. ” l NHI (as opposed to NHS) merits less than 1 page of that 77 page document. l Thus what was envisaged initially seems to be a multi-tier system: a public National Health Service, alongside of which is a mandatory contributory environment formal sector workers. l This suggests that the ANC Health Plan envisaged a “substitutive” role for medical schemes under NHI. l This early thinking needs to be revisited in the NHI debate in 2010.

Innovative Medicines South Africa (IMSA) is a pharmaceutical industry association promoting the value of medicine innovation in healthcare. IMSA and its member companies are working towards the development of a National Health Insurance system with universal coverage and sustainable access to innovative research-based healthcare. Contact details: Val Beaumont (Executive Director) Tel: +2711 880 4644 Fax: +2711 880 5987 Innovative Medicines SA (IMSA) Cell: 082 828 3256 PO Box 2008, Houghton, 2041. South Africa val@imsa. org. za www. imsa. org. za

Material produced for IMSA by Professor Heather Mc. Leod hmcleod@iafrica. com www. hmcleod. moonfruit. com